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IAB internet advertising revenue report 2015 first six months results

October 2015

An industry survey conducted by PwC and sponsored by the Interactive Advertising Bureau (IAB)

PwC Page 2 of 26

Table of Contents

Background ......................................................................................................................................................................... 3

Executive summary ............................................................................................................................................................ 4

Detailed findings................................................................................................................................................................. 6

Historical trends ......................................................................................................................................................... 7

Ad formats ................................................................................................................................................................. 12

Industries................................................................................................................................................................... 16

Pricing models ........................................................................................................................................................... 18

Appendix ........................................................................................................................................................................... 20

PwC Page 3 of 26

Background

About the IAB internet advertising revenue report

Conducted by PwC Advisory Services LLC (“PwC”) on an ongoing basis, with results released quarterly, the “IAB Internet Advertising Revenue Report” was initiated by the Interactive Advertising Bureau (IAB) in 1996. This report utilizes data and information reported directly to PwC, publicly available online corporate data, and information provided by online ad selling companies.

The results reported are considered to be an accurate measurement of internet/online/mobile advertising revenues because much of the data is compiled directly from information supplied by companies selling advertising online. The report includes data reflecting online advertising revenues from websites, commercial online services, ad networks and exchanges, mobile devices, and email providers, as well as other companies selling online advertising.

The report is conducted independently by PwC on behalf of the IAB. PwC does not audit the information and provides no opinion or other form of assurance with respect to the information. Only aggregate results are published and individual company information is held in strict confidence with PwC. Further details regarding scope and methodology are provided in the appendix to this report.

David Silverman PwC

PwC Page 4 of 26

Executive summary

IAB internet advertising revenue report 2015 second quarter and first six months highlights

Internet advertising revenues (“revenues”) in the United States totaled $27.5 billion for the first six months of 2015, with Q1 2015 accounting for approximately $13.2 billion and Q2 2015 accounting for approximately $14.3 billion. Revenues for the first six months of 2015 increased 19.0% over the first six months of 2014.

Key trends underlying Half-Year (HY) 2015 results Revenues increase 19.0% in HY 2015 — Internet advertising revenues in the United States totaled $14.3 billion in the second quarter of 2015, an increase of 8.5% from the 2015 first-quarter total of $13.2 billion and an increase of 22.5% from the 2014 second-quarter total of $11.7 billion. Year-to-date revenues through June 2015 totaled $27.5 billion, up 19.0% from the $23.1 billion reported in 2014.

“Advertisers are more committed than ever to connect with audiences on digital screens. Content is key to winning consumer attention on mobile, in digital video, on desktop, and more – throughout the day."

— Randall Rothenberg, President and CEO, IAB

Social advertising increases 51% in HY 2015 — Social advertising in the United States totaled $4.4 billion during HY 2015, up from $2.9 billion in the first six months of 2014. “We’re witnessing a seismic shift in consumer behavior to the always-on, connected consumer. As a result, we’ve seen Social continue to fuel the growth of digital, particularly with respect to Mobile and Video.”

— David Silverman, Partner, PwC

PwC Page 5 of 26

Year-to-date revenues show strong

growth

HY 2014 vs. HY 2015 ($ billions)

$23.09

$27.48

HY 2014 HY 2015

19.0%

Source: IAB/PwC Internet Ad Revenue Report, HY2015

Revenues for HY 2015 totaled $27.5 billion, $4.4 billion (19.0%) higher than in HY 2014

PwC Page 6 of 26

Detailed findings

Revenues totaled $14.3 billion in Q2 2015

Total 2015 second-quarter revenues were $2.62 billion (22.5%) higher than in the second quarter of 2014 and $1.12 million (8.5%) higher than in the first quarter of 2015.

Q2 2014 vs. Q2 2015 ($ billions) Q1 2015 vs. Q2 2015 ($ billions)

$11.68

$14.30

Q2 14 Q2 15

22.5% $13.18

$14.30

Q1 15 Q2 15

8.5%

Source: IAB/PwC Internet Ad Revenue Report, HY 2015

PwC Page 7 of 26

Historical second-quarter revenue

trends

Strong revenue growth continued in Q2 2015

2015 second-quarter revenues increased on a year-over-year basis. The 2015 second-quarter was the highest quarter on record, with the 22.5% year-over-year growth besting the 10-year compound annual growth rate (CAGR) from 2006-2015 of 15.0%.

Second-quarter revenue 2006-2015 ($ billions)

* CAGR: Compound Annual Growth Rate

$4.1

$5.1

$5.7 $5.4$6.2

$7.7

$8.7

$10.3

$11.7

$14.3

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

CAGR* 15.0%

Source: IAB/PwC Internet Ad Revenue Report, HY 2015

PwC Page 8 of 26

Historical quarterly revenue trends

Quarterly growth continued upward trend

From the momentum built in 2010, internet advertising continues to show strong growth. After a seasonal dip in Q1 2015, Q2 2015 revenues continued the upward trend.

Since 2010, a strong seasonal trend has emerged for internet advertising revenues. With each annual cycle, revenue peaks in the fourth quarter, and is followed by a dip in the first quarter before the upward trend starts again in the second quarter.

Quarterly revenue growth trends 1996-2015 ($ billions)

$0

$2

$4

$6

$8

$10

$12

$14

$16

Source: IAB/PwC Internet Ad Revenue Report, HY 2015

1997 1998 1999 2009 1996 2000 2001 2002 2003 2004 2005 2006 2007 2008 2010 2011 2012 2013 2014 1H 2015

PwC Page 9 of 26

Historical revenue mix – first half vs.

second half

First-half revenues reached $27.5 billion

Applying historical seasonal data, the 2015 first six months’ revenues of $27.5 billion are on an expected annual run-rate to make 2015 the highest year in revenues, on pace to exceed the previous highest annual total of $49.5 billion reported in 2014.

Historical revenue mix, first half vs. second half ($ billions)

$7.9 $10.0 $11.5 $10.9 $12.1$14.9 $17.0

$20.1$23.1

$27.5$9.0

$11.2 $11.9 $11.8

$13.9

$16.8

$19.5

$22.7

$26.4

?

$0

$10

$20

$30

$40

$50

$60

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Last 6 months First 6 months

Source: IAB/PwC Internet Ad Revenue Report, HY 2015

Over the past ten years, second half revenues averaged 53% of

the annual total.

PwC Page 10 of 26

Historical data findings

Annual and quarterly revenue growth

Revenue (in mil)

Q/Q Growth Y/Y Growth Revenue (in mil)

Q/Q Growth Y/Y Growth

Q1 2003 $1,632 3% 7% Q1 2010 $5,942 -5% 9%

Q2 2003 $1,660 2% 14% Q2 2010 $6,185 4% 14%

Q3 2003 $1,793 8% 24% Q3 2010 $6,465 5% 18%

Q4 2003 $2,182 22% 38% Q4 2010 $7,449 15% 19%

Total 2003 $7,267 21% Total 2010 $26,041 15%

Q1 2004 $2,230 2% 37% Q1 2011 $7,264 -2% 22%

Q2 2004 $2,369 6% 43% Q2 2011 $7,678 6% 24%

Q3 2004 $2,333 -2% 30% Q3 2011 $7,824 2% 21%

Q4 2004 $2,694 15% 24% Q4 2011 $8,970 15% 20%

Total 2004 $9,626 33% Total 2011 $31,735 22%

Q1 2005 $2,802 4% 25% Q1 2012 $8,307 -7% 14%

Q2 2005 $2,985 7% 26% Q2 2012 $8,722 5% 14%

Q3 2005 $3,147 5% 35% Q3 2012 $9,236 6% 18%

Q4 2005 $3,608 15% 34% Q4 2012 $10,307 12% 15%

Total 2005 $12,542 30% Total 2012 $36,570 15%

Q1 2006 $3,848 7% 37% Q1 2013 $9,806 -5% 18%

Q2 2006 $4,061 6% 36% Q2 2013 $10,260 5% 18%

Q3 2006 $4,186 3% 33% Q3 2013 $10,609 3% 15%

Q4 2006 $4,784 14% 33% Q4 2013 $12,106 14% 17%

Total 2006 $16,879 35% Total 2013 $42,781 17%

Q1 2007 $4,899 2% 27% Q1 2014 $11,414 -6% 16%

Q2 2007 $5,094 4% 25% Q2 2014 $11,678 2% 14%

Q3 2007 $5,267 3% 26% Q3 2014 $12,207 5% 15%

Q4 2007 $5,946 13% 24% Q4 2014 $14,152 16% 17%

Total 2007 $21,206 26% Total 2014 $49,451 16%

Q1 2008 $5,765 -3% 18% Q1 2015 $13,179 -7% 16%

Q2 2008 $5,745 0% 13% Q2 2015 14,302 9 % 23%

Q3 2008 $5,838 2% 11%

Q4 2008 $6,100 4% 2%

Total 2008 $23,448 11%

Q1 2009 $5,468 -10% -5%

Q2 2009 $5,432 -1% -5%

Q3 2009 $5,500 1% -6%

Q4 2009 $6,261 14% 3%

Total 2009 $22,661 -3%

PwC Page 11 of 26

Revenue concentration

Top 10 companies command 72% of revenues in Q2 2015 Online advertising revenue remains concentrated with the ten leading ad-selling companies, accounting for 72% of total revenues in Q2 2015, up slightly from the 71% reported in Q2 2014. Companies ranked 11th to 25th accounted for 11% of revenues in Q2 2015, consistent with the 11% reported in Q2 2014. Despite the emergence of a few heavyweights in internet advertising publishing, the concentration of top-10 revenue has remained relatively unchanged over the past ten years, fluctuating between 69% and 74%.

% share of total revenues

$0

$2

$4

$6

$8

$10

$12

$14

$16

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Top 10 Top 25 Remaining

17%

11%

72%

2015 Q2 Share

Source: IAB/PwC Internet Ad Revenue Report, HY 2015

HY 2015

TOP 10

TOP 25

PwC Page 12 of 26

Ad format – second quarter 2015 results

Search continued to lead ad formats, while Mobile continued its steady growth

Non mobile Search accounted for $5.2 billion (36% of total) of Q2 2015 revenues, compared with $4.5 billion (38% of total) in Q2 2014. Inclusive of mobile-related search revenue, the Search format totaled $7.1 billion (50% of total) in Q2 2015 revenue.

Non mobile Display-related advertising accounted for $3.5 billion or 24% of total revenues during Q2 2015, up 7% from the $3.3 billion (28% of total) reported in Q2 2014. Q2 2015 Display-related advertising includes Banner Ads (13% of revenues, or $1.9 billion), Digital Video (7% or $1.0 billion), Rich Media (3% or $360 million), and Sponsorship (1% or $184 million). Inclusive of mobile-related display revenue, the Display-related format totaled $5.8 billion (41% of total) in Q2 2015 revenue.

Mobile revenues increased 56% from the $2.8 billion (24% of total) reported in Q2 2014 to $4.4 billion (31% of total) in Q2 2015. Mobile revenues consisted of Mobile Search ($1.9 billion), Mobile Display* ($2.3 billion), and Mobile Other ($140 million).

Non mobile Classifieds revenues totaled $752 million or 5% of Q2 2015 revenues, up 15% from the $656 million (6% of total) reported in Q2 2014.

Non mobile Lead Generation revenues accounted for 3% of Q2 2015 revenues, or $461 million, down slightly from the $463 million (4% of total) reported in Q2 2014.

Ad formats – Q2 2014 Ad formats – Q2 2015

Source: IAB/PwC Internet Ad Revenue Report, HY 2015

* Mobile Display includes: banner ads, digital video, digital audio, sponsorships, and rich media advertising

served to mobile devices.

** Amounts may not equal 100% due to rounding and omission of minor categories.

38%

24%

17%

7%

6%

4%3%2%

Search

Mobile

Banner

Digital Video

Classifieds

Lead Generation

Rich Media

Sponsorship

36%

31%

13%

7%

5%3%

3%

1%

Mobile Formats

44%53%

3%

Search

Display*

Other

Total - $11.7 billion** Total - $14.3 billion**

51%47%

2%

Search

Display*

Other

Mobile Formats

PwC Page 13 of 26

Ad format – first half 2015 results

Mobile continued its increase in revenue share, with Mobile Display leading Mobile ad formats Non mobile Search accounted for $10.1 billion (37% of total) of HY 2015 revenues, compared with $9.1 billion

(39% of total) in HY 2014. Inclusive of mobile-related search revenue, the Search format totaled $13.7 billion (50% of total) in HY 2015 revenue.

Non mobile Display-related advertising accounted for $6.8 billion or 25% of total revenues during HY 2015, up 5% from the $6.5 billion (28% of total) reported in HY 2014. HY 2015 Display-related advertising includes Banner Ads (14% of HY 2015 revenues, or $3.8 billion), Digital Video (7% or $2.0 billion), Rich Media (2% or $686 million), and Sponsorship (1% or $350 million). Inclusive of mobile-related display revenue, the Display-related format totaled $11.1 billion (40% of total) in HY 2015 revenue.

Mobile revenues increased 54% from the $5.3 billion (23% of total) reported at HY 2014 to $8.2 billion (30% of total) at HY 2015. Mobile revenues consisted of Mobile Search ($3.6 billion), Mobile Display* ($4.3 billion), and Mobile Other ($303 million).

Non mobile Classifieds revenues totaled $1.5 billion or 5% of HY 2015 revenues, up 14% from the $1.3 billion (6% of total) reported in HY 2014.

Non mobile Lead Generation revenues accounted for 3% of HY 2015 revenues, or $931 million, up 2% from the $911 million (4% of total) reported in HY 2014.

Ad formats – first half 2014 Ad formats – first half 2015

Source: IAB/PwC Internet Ad Revenue Report, HY 2015 * Mobile Display includes: banner ads, digital video, digital audio, sponsorships, and rich media advertising

served to mobile devices. ** Amounts may not equal 100% due to rounding and omission of minor categories.

39%

23%

17%

6%

6%

4% 3%

2%

Search

Mobile

Banner

Digital Video

Classifieds

Lead Generation

Rich Media

Sponsorship

37%

30%

14%

7%

5%3%2%

1%

44%

52%

4%

Search

Display*

Other

Mobile Formats

Total - $23.1 billion** Total - $27.5 billion**

51%47%

2%

Search

Display*

Other

Mobile Formats

PwC Page 14 of 26

Historical format trends

Search retained largest share of revenue, while Mobile share of revenue continued to surge

Non mobile Search remains the leading format at 37% of HY 2015 revenues. Decline in its overall share is

attributed to growth in Mobile and Mobile Search, which is included in the Mobile category.

Non mobile Search, Banner Ads, Classifieds, Lead Generation, and Rich Media are down slightly as a percentage of total revenue due to the substantial growth of Mobile.

Non mobile Digital Video increased as a percentage of total revenue in comparison to HY 2014 results, a result of the 35% increase in revenue from the previous year.

With the gap between Mobile media usage and ad spending starting to close, Mobile ad revenues continued to

gain share, representing 30% of total HY 2015 revenues, as compared to 23% of total revenues reported in HY 2014 and 15% in HY 2013. While Mobile has eroded share of other formats, the Mobile format itself is comprised of multiple formats.

Advertising format share, 2006 - 2015* (% of total revenue)

* Format definitions may have changed over the time period depicted, both within the survey process and as

interpreted by survey respondents.

0%

10%

20%

30%

40%

50%

Search Mobile Banner Classifieds Digital Video LeadGeneration

Rich Media

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Source: IAB/PwC Internet Ad Revenue Report, HY 2015

PwC Page 15 of 26

Social media advertising revenue

Strong growth each half-year in social

For first half of 2015, Social media revenue was $4.4 billion, up 51% from HY 2014. Social has experienced growth at each half-year since we first measured it in 2012. These steady increases are reflected in the 53% compound annual growth rate of social from HY 2012 to HY 2015. Social’s continued growth has played a key role in the growth of Mobile, as Social is a significantly mobile activity.

Note: We define social media as advertising delivered on social platforms, including social networking and social gaming websites and apps, across all device types, including desktop, laptop, smartphone and tablet.

Social media advertising revenue 2012-2015 ($ billions)

* CAGR: Compound Annual Growth Rate

$1.2

$1.7$1.9

$2.6$2.9

$4.1

$4.4

1H 2012 2H 2012 1H 2013 2H 2013 1H 2014 2H 2014 1H 2015

CAGR*53%

Source: IAB/PwC Internet Ad Revenue Report, HY 2015

PwC Page 16 of 26

Ad revenues by industry category

Retail drives advertising, as dollars shift to digital

Retail advertisers continue to represent the largest category of internet ad spending, accounting for 22% of total revenues in HY 2015, up from the 21% reported in HY 2014.

Financial Services advertisers accounted for 13% of revenues in HY 2015, consistent with the 13% reported in HY 2014.

Automotive advertisers accounted for 13% of revenues in HY 2015, up from the 12% reported in HY 2014.

Telecom companies accounted for 9% of revenues in HY 2015, consistent with the 9% reported in HY 2014.

Leisure Travel (airfare, hotels, and resorts) accounted for 9% of revenues in HY 2015, consistent with the 9% reported in HY 2014.

Consumer Packaged Goods represented 6% in HY 2015, down from the 7% reported in HY 2014.

Consumer Electronics and Computers represented 7% of revenues in HY 2015, consistent the 7% reported in HY 2014.

Pharmaceutical/Healthcare accounted for 5% in HY 2015, consistent with the 5% reported in HY 2014.

Media accounted for 5% in HY 2015, consistent with the 5% reported in HY 2014.

Entertainment accounted for 4% of HY 2015 revenues, consistent with the 4% reported in HY 2014.

PwC Page 17 of 26

Industry advertising – year-over-year

comparison

Internet ad revenues by major industry category*, year to date: 2014 vs. 2015

* Industry category definitions may have changed over the time period depicted, both within the survey process and as interpreted by survey respondents. Amounts do not total to 100% as minor categories are not displayed.

21%

13%

12%

9%

9%

7%

7%

5%

5%

4%

22%

13%

13%

9%

9%

6%

7%

5%

5%

4%

Retail

Financial Services

Auto

Telecom

Leisure Travel

Consumer Packaged Goods

Consumer Electronics & Computers

Pharma & Healthcare

Media

Entertainment

HY 2014 HY 2015

Source: IAB/PwC Internet Ad Revenue Report, HY 2015

PwC Page 18 of 26

Revenues by pricing model

Performance-based pricing shows slight uptick

Approximately 66% of HY 2015 revenues were priced on a performance basis, up from the 65% reported in HY 2014.

Approximately 32% of HY 2015 revenues were priced on a cost per medium/thousand (CPM) or impression basis, down from the 34% reported in HY 2014.

Approximately 2% of HY 2015 revenues were priced on a hybrid basis, up from the 1% reported in HY 2014.

Pricing models – HY 2014 Pricing models – HY 2015

Total - $23.1 billion Total - $27.5 billion

Pricing models – Q2 2014 Pricing models – Q2 2015

Total - $11.7 billion Total - $14.3 billion

CPM34%

65%

Hybrid1%

CPM32%

66%

Hybrid2%

CPM34%

65%

Hybrid1%

CPM33%

66%

Hybrid1%

Performance Performance

Source: IAB/PwC Internet Ad Revenue Report, HY 2015

Performance Performance

PwC Page 19 of 26

Historical pricing model trends

Performance-based pricing remains the preferred model

• Performance-based pricing, the leading pricing model since 2006, gained slightly to 66% of total revenue in HY 2015.

• CPM/impression-based pricing decreased in the first six months of 2015, down to 32% of revenues from 34% in HY 2014.

• Hybrid pricing increased to 2% of total revenues in HY 2015, up from the 1% reported in HY 2014.

Internet ad revenues by pricing model*

* Pricing model definitions may have changed over the time period depicted both within the survey process and

as interpreted by survey respondents.

46%48%

45%

39%37%

33% 31% 32% 33% 34%32%

41%

47%

51%

57%59%

62%65% 66% 65% 65%

66%

13%

5% 4% 4% 4% 5% 4%2% 2% 1%

2%0%

10%

20%

30%

40%

50%

60%

70%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

% o

f to

tal re

ven

ues

CPM Performance Hybrid

Source: IAB/PwC Internet Ad Revenue Report, HY 2015

PwC Page 20 of 26

Appendix

Definitions of leading industry categories The industry categories used in the "IAB Internet Advertising Revenue Report" were sourced from the North American Standard Industrial Classification (SIC) Manual.†

Retail Includes mail order/catalog, apparel, restaurants/fast food, home furnishings/textiles, toys, pet food/supplies, appliances, jewelry, drugstores, retail stores, and cosmetics stores.

Automotive Includes all automotive-related categories including sale/purchase of vehicles and parts and maintenance.

Entertainment Includes film, music, TV, box office, video games, and amusement & recreation.

Consumer packaged goods

Includes packaged goods, food products, household products, and tobacco.

Leisure travel Includes travel, hotel, airlines, and resorts.

Consumer Electronics and Computers

Includes hardware (computers, computer storage devices, and computer peripheral equipment), consumer electronics, prepackaged software (operating, utility, and applications programs), local area network systems and network systems integration, computer processing, and data preparation and data processing services.

Financial Services

Includes commercial banks, credit agencies, personal credit institutions, consumer finance companies, loan companies, business credit institutions, and credit card agencies. Also includes companies engaged in the underwriting, purchase, sale, or brokerage of securities and other financial contracts.

Telecommun-ications

Includes point-to-point communications services, including cellular phone services, paging services, wireless internet access, and wireless video services. Includes multichannel video providers on a subscription fee basis (e.g., cable television, wireless cable television, and direct broadcast satellite services).

Pharmaceutical & Healthcare

Includes pharmaceutical products, facilities, services, researchers, and biological products. Also comprises establishments providing healthcare and social assistance for individuals as well as personal care, toiletries, and cosmetic products.

Media Includes establishments primarily engaged in radio and television broadcasting (network and station) including commercial, religious, educational, and other radio or television stations. Also includes establishments primarily engaged in publishing newspapers, periodicals, and books.

†Survey participants reported results based on the 20 industry categories listed on page 25, which were used specifically for the "IAB Internet Advertising Revenue Report." This is consistent with other relevant industry categorization sources that measure advertising spending by industry. For purposes of this report, PwC classified a number of individual categories under “Retail.”

PwC Page 21 of 26

Definitions of advertising formats Banner Advertising

Advertiser pays an online company for space on one or more of the online company’s pages to display a static or linked banner or logo.

Sponsorship Advertiser pays for custom content and/or experiences, which may or may not include ad elements such as display advertising, brand logos, advertorial, or pre-roll video. Sponsorships fall into several categories:

Spotlights are custom-built pages incorporating an advertiser’s brand and housing a collection of content usually around a theme

Advergaming can range from an advertiser buying all the ad units around a game or a “sponsored by” link to creating a custom branded game experience

Content & Section Sponsorship is when an advertiser exclusively sponsors a particular section of the site or email (usually existing content) re-skinned with the advertiser’s branding

Sweepstakes & Contests can range from branded sweepstakes on the site to a full-fledged branded contest with submissions and judging

Search Fees advertisers pay online companies to list and/or link their company site domain name to a specific search word or phrase (includes paid search revenues). Search categories include:

Paid listings – payments made for clicks on text links that appear at the top or side of search results for specific keywords. The more a marketer pays, the higher the position it gets. Marketers only pay when a user clicks on the text link.

Contextual search – payments made for clicks on text links that appear in an article based on the context of the content, instead of a user-submitted keyword. Payment only occurs when the link is clicked.

Paid inclusion – payments made to guarantee that a marketer's URL is indexed by a search engine (i.e. advertiser isn’t paid only for clicks, as in paid listings).

Site optimization – payments made to optimize a site in order to improve the site’s ranking in search engine results pages (SERPs). (For example, site owner pays a company to tweak the site architecture and code, so that search engine algorithms will better index each page of the site).

Lead Generation

Fees paid by advertisers to online companies that refer qualified potential customers (e.g., auto dealers which pay a fee in exchange for receiving a qualified purchase inquiry online) or provide consumer information (demographic, contact, behavioral) where the consumer opts in to being contacted by a marketer (email, postal, telephone, fax). These processes are priced on a performance basis (e.g., cost-per-action, -lead or -inquiry), and can include user applications (e.g., for a credit card), surveys, contests (e.g., sweepstakes) or registrations.

Classifieds and Auctions

Fees paid to advertisers by online companies to list specific products or services (e.g., online job boards and employment listings, real estate listings, automotive listings, auction-based listings, yellow pages).

Rich Media Display-related ads that integrate some component of streaming interactivity. Rich media ads often include flash or java script, but not content, and can allow users to view and interact with products or services (e.g., scrolling or clicking within the ad opens a multimedia product description, expansion, animation, video or a “virtual test-drive” within the ad). All IAB Rising Stars ad formats are considered Rich Media. Video commercials that appear in video players are considered Digital Video Ads, not Rich Media. “Interstitials” have been consolidated within the rich media category and represent full- or partial-page text and image server-push advertisements which appear in the transition between two pages of content. Forms of interstitials can include a variation of the following terms:

Splash screens – a preliminary page that precedes the regular home page of a website that usually promotes a particular site feature or provides advertising. A splash page is timed to move onto the home page after a short period of time.

Pop-up ads and pop-under ads – an advertisement that appear in a separate window which automatically loads over an existing content window, without an associated banner.

Daughter windows – an advertisement that runs in a separate window associated with a concurrently displayed banner. The content and banner are typically displayed first, followed by the daughter window.

Superstitials – ads that are distinct from interstitials because of the much higher ad quality, and that they play instantly (ads are fully downloaded before they are displayed).

PwC Page 22 of 26

Definitions of advertising formats (cont.)

Digital Video Advertising

Advertising that appears before, during or after digital video content in a video player (i.e. pre-roll, mid-roll, post-roll video ads). Digital Video Ads include TV commercials online and can appear in streaming content or in downloadable video. Display-related ads on a page (that are not in a player) that contain video are categorized as rich media ads. Video Overlays are also categorized as Digital Video Advertising. Video overlays include small ads that appear on top of digital video content. They can appear to be display, video, rich media, text or another ad format but are contained within the video player.

Mobile Advertising

Advertising tailored to and delivered through wireless mobile devices such as smartphones, feature phones (e.g. lower-end mobile phones capable of accessing mobile content), and media tablets. Typically taking the form of static or rich media display ads, text messaging ads, search ads, or audio/video spots, such advertising generally appears within mobile websites (e.g. websites optimized for viewing on mobile devices), mobile apps, text messaging services (i.e. SMS, MMS) or within mobile search results (i.e., 411 listings, directories, mobile-optimized search engines). Mobile advertising formats include: Search, Display (banner ads, digital video, digital audio, sponsorships, and rich media), and Other advertising served to mobile devices.

Digital Audio Refers to partially or entirely advertising-supported audio programming available to consumers on a streaming basis, delivered via the wired and mobile Internet. This includes a wide range of services, such as the following:

Online audio streams of terrestrial radio stations;

Purely online radio stations, with either professional or amateur DJs; Personalized (i.e., without human editors/DJs) and on-demand, streamed audio services that

create playlists based on user preferences of artists, tracks, or genres;

Music or spoken word audio content delivered within a different website or application, e.g., in-game music services.

Social Media Advertising

Advertising delivered on social platforms, including social networking and social gaming websites and apps, across all device types, including desktop, laptop, smartphone and tablet.

PwC Page 23 of 26

Survey scope and methodology

Survey scope The Interactive Advertising Bureau (IAB) retained PwC to establish a thorough standard for measuring the growth of internet/online/mobile advertising revenues. The "IAB internet advertising revenue report" is part of an ongoing IAB mission to provide an accurate barometer of internet advertising growth.

To achieve differentiation from existing estimates and accomplish industry-wide acceptance, key aspects of the survey include:

Obtaining historical data directly from companies generating internet/online/mobile advertising revenues;

Making the survey as inclusive as possible, encompassing all forms of internet/online/mobile advertising, including websites, consumer online services, ad networks, and mobile devices; and

Ensuring and maintaining a confidential process, releasing only aggregate data.

Methodology PwC performs the following:

Compiles a database of industry participants selling internet/online and mobile advertising revenues

Conducts a quantitative mailing survey with leading industry players, including Web publishers, ad networks, commercial online service providers, mobile providers, email providers, and other online media companies

Acquires supplemental data through the use of publicly disclosed information

Requests and compiles several specific data items, including monthly gross commissionable advertising revenue by industry category and transaction

Identifies non-participating companies and applies a conservative revenue estimate based on available public sources

Analyzes the findings, identifies and reports key trends

Survey industry categories Automotive Beer/Wine/Liquor Business Products/Services Computers (Hardware/Software) and Consumer Electronics Consumer Packaged Goods, Food, Non-Alcoholic Beverages and Candy Educational Services Entertainment (Film, Music, TV, Box Office, Video Games, Amusement/Recreational)

Financial Services (Banks, Insurance, Securities, Mortgages) Personal Care, Toiletries, and Cosmetics Drugs and Remedies Manufacturing Media Professional Sports and Sporting & Athletic Goods Real Estate

Restaurants/Fast Food Retail, Mail Order, Catalogs and Apparel Telecommunications: Telephony, Cable/Satellite TV Services, ISPs Toys/Games Leisure Travel (Airfare, Hotels, Resorts) Business Travel (Airfare, Hotels, Resorts)

PwC Page 24 of 26

About the Interactive Advertising Bureau The Interactive Advertising Bureau (IAB) empowers the media and marketing industries to thrive in the digital economy. It is comprised of more than 650 leading media and technology companies that are responsible for selling, distributing and optimizing digital advertising and marketing. Together, they account for 86 percent of online advertising in the United States. Working with its member companies, the IAB evaluates and recommends standards and practices and fields critical research on interactive advertising. The organization is committed to professional development, elevating the knowledge, skills, and expertise of individuals across the digital marketing industry. The IAB also educates marketers, agencies, media companies and the wider business community about the value of interactive advertising. Founded in 1996, the IAB is headquartered in New York City.

Overall report guidance provided by IAB leadership Executive Committee

President and CEO

Randall Rothenberg

IAB

Joe Apprendi Collective Joan Gillman Time Warner Cable Media

Chairman David Morris CBS Interactive Neal Mohan Google Jim Norton AOL

Vice Chair Lauren Wiener Tremor Video Vivek Shah Ziff Davis, LCC

Rik van der Kooi Microsoft Advertising

Board of Directors

Michael Barrett Millennial Media David Brinker News Corporation Paul Caine Bloomberg Businessweek Kevin Conroy Univision Communications Inc. Jory Des Jardins SheKnows Mark Ford Time Inc. Eric Franchi Undertone Michael Friedenberg IDG Communications Eric Harris BuzzFeed Mark Howard Forbes Media

Scott Howe Acxiom Eric Johnson ESPN.com Neil O. Johnston Cox Media Group Seth Ladetsky Turner Broadcasting System David Lawenda Facebook Meredith Kopit Levien The New York Times Company Jean-Philippe Maheu Twitter Kirk McDonald PubMatic David Moore Xaxis Harold Morgenstern Discovery Communications

Penry Price LinkedIn Scott Schiller NBC Universal Drew Schutte Condé Nast John Trimble Pandora Lisa Utzschneider Yahoo Jacob Weisberg Slate Mike Welch AT&T AdWorks Troy Young

Hearst Magazines Digital Media

Ex-Officio

Founding Chairman Rich LeFurgy Archer Advisors

Treasurer John Toohey

Time Warner Cable Media

Secretary Stu Ingis Venable LLP

PwC Page 25 of 26

PwC’s Technology and Entertainment, Media, and Communications practices As business, accounting, and tax advisors to many of the world’s leading Entertainment, Media, and Communications (EMC) and Technology (Tech) companies, PwC (www.pwc.com) has an insider’s view of trends and developments driving the industry. With approximately 1,200 practitioners serving EMC and Tech clients in the United States, PwC is deeply committed to providing clients with industry experience and resources. In recent years, our pioneering work in EMC and Tech has included developing strategies to leverage digital technology, identifying new sources of financing, and marketplace positioning in industries characterized by consolidation and transformation. Our experience reaches across all geographies and segments of the EMC and Tech sectors, including broadband, wireless, the internet, music, film, television, publishing, advertising, gaming, theme parks, computers and networking, and software. With thousands of practitioners around the world, we're always close at hand to provide deep industry knowledge and resources.

Our services include:

Business assurance services

Web audience measurement and advertising delivery auditing and advisory

IAB Measurement Certification Compliance auditing

Privacy policy structuring, attestation, and compliance advisory

Mergers & acquisitions assistance

Tax planning and compliance

Capital sourcing and IPO assistance

Marketing & Media operations enablement

For more information, contact one of the following PwC professionals:

New York David Silverman Partner, Assurance Services 646.471.5421 david.silverman@pwc.com

New York Russ Sapienza Principal, Advisory Services 646.471.1517 russell.j.sapienza@pwc.com

Hallandale Beach Stephanie Faskow Manager, Advisory Services 954.604.1968 stephanie.faskow@pwc.com

Boston Vic Petri Partner, Assurance Services 617.478.1698 victor.petri@pwc.com

San Jose Mike Pearl Principal, Assurance Services 408.817.3801 michael.pearl@pwc.com

Seattle Suzanne Cragin Principal, Assurance Services 206.398.3550 suzanne.b.cragin@pwc.com

PricewaterhouseCoopers has exercised reasonable care in the collecting, processing, and reporting of this information but has not independently verified, validated, or audited the data to verify the accuracy or completeness of the information. PricewaterhouseCoopers gives no express or implied warranties, including but not limited to any warranties of merchantability or fitness for a particular purpose or use and shall not be liable to any entity or person using this document, or have any liability with respect to this document. This report is for general purposes only, and is not a substitute for consultation with professional advisors.

© 2015 PwC. All rights reserved. PwC refers to the US member firm or one of its subsidiaries or affiliates, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details.

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